Financial Services

UPDATE 1-California blames 2017 fire on private system; PG&E shares soar

(Reuters) – California fire officials on Thursday said an investigation had found that the 2017 Tubbs Fire was caused by a private electrical system, effectively clearing PG&E Corp of liability for the deadly blaze, but the embattled utility said it still faced huge potential liabilities from other fires.

FILE PHOTO – Pacific Gas and Electric (PG&E) workers inspect a gas line at a home destroyed by the Tubbs Fire in Santa Rosa, California, U.S., October 12, 2017. REUTERS/Stephen Lam

In a brief statement, the California Department of Forestry and Fire said its investigators “did not identify any violations of state law, Public Resources Code, related to the cause of this fire.”

Shares of PG&E, which has stated that it did not expect to be found liable for the Tubbs Fire in Northern California, rose nearly 75 percent to $13.95 in regular trade. But after Reuters reported that the company still plans to plans to file for Chapter 11 bankruptcy protection, shares fell more than 7 percent in extended trading.

PG&E is facing liabilities that could potentially exceed $30 billion because of the possibility that their equipment was involved in starting the devastating wildfires in the state in 2017 and 2018. In a statement on Thursday, the utility said its financial situation remained dire.

“Regardless of today’s announcement, PG&E still faces extensive litigation, significant potential liabilities and a deteriorating financial situation, which was further impaired by the recent credit agency downgrades to below investment grade,” the company said.

“Resolving the legal liabilities and financial challenges stemming from the 2017 and 2018 wildfires will be enormously complex and will require us to address multiple stakeholder interests, including thousands of wildfire victims and others who have already made claims and likely thousands of others we expect to make claims,” the statement said.

As of Thursday afternoon, PG&E still planned to seek bankruptcy protection around Monday, despite the findings on the 2017 fire, a person familiar with the matter said.

The Tubbs Fire ignited on Oct. 8, 2017, and burned 36,807 acres (14,895 hectares) from Napa County to suburban Santa Rosa, in Sonoma County, killing 22 people and injuring one firefighter, according to CalFire. The blaze was part of a conflagration of more than 170 fires that burned 245,000 acres (99,148 hectares), CalFire said.

PG&E provides electricity and natural gas to 16 million customers in northern and central California.

PG&E shareholder BlueMountain Capital Management said the announcement meant the utility should not rush into a bankruptcy filing.

“The news from Cal Fire that PG&E did not cause the devastating 2017 Tubbs fire is yet another example of why the company shouldn’t be rushing to file for bankruptcy, which would be totally unnecessary and bad for all stakeholders,” the company said in an emailed statement.

Reporting by Shanti S Nair in Bengaluru and Nichola Groom in Los Angeles; Editing by Leslie Adler and Bill Berkrot


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